Essays on Industry Specialization, Job Mobility and Wages

I study the effect of the specialization of occupations into specific industries on the job mobility, bargaining power, and wages of workers in these occupations. In chapter I, using occupation-industry-state level data on wages and employment I estimate the relationship between industrial concentration of employment (CEI) and wages, wage dispersion, and productivity-wage gaps. My analysis shows that occupations that are more industry-specific earn lower wages, face higher cross-industry wage dispersion, and are associated with higher productivity-wage gaps, thus making a strong case for policies promoting skill transferability across sectors. In chapter II, I use individual-level data with instrumental variables and a theoretical search model to further investigate the mechanism driving the relationship between CEI and wages. I validate the negative effect of industry specificity on wages and I show that the effect works through a decrease in workers\u27 cross-industry and cross-occupation mobility, which in turn decreases firm competition and wages across all industries where an occupation can be employed. This finding confirms that educational programs fostering training on transferable skills can have a positive welfare effect for low-wage industry-specific workers. In chapter III, I investigate a skill-based human-capital explanation of industry-specificity and I use empirical methods to confirm Chapter II\u27s prediction that CEI increases firm market power within industries. I find that skill transferability is negatively associated with industry specificity, but this does not fully explain the negative effect of CEI on wages. Most importantly, I find a CEI gradient in the elasticity of the labor supply to the firm, which confirms that industry-specific workers have lower bargaining power than their generalist counterparts. My dissertation\u27s primary contribution is to develop an empirical index to capture the yet unexplored concept of industry specificity and to identify it as a potential source of frictions generating downward pressure on wages in low-wage labor markets. The empirical and theoretical insights of my work help understand the economic consequences of industry mobility and occupational transferability